BREUING, et al. v. CALLAHAN

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Civil action commenced in
the Superior Court Department on July 24, 1996.

The case was heard by Elizabeth
Butler, J., on motions for summary judgment.

James A. Goodhue for the
plaintiffs.

Charles G. Devine, Jr.,
for the defendant.

BROWN, J.

On April 10, 1996, the plaintiffs, Karl Breuing
and Heidi Kummer (buyers), executed a purchase and sale agreement
to purchase the Dover property of the defendants, Edgar and Doris
Callahan (sellers),[2]for $685,000. The plaintiffs delivered a deposit of
$68,500.00 to the listing broker as required by the agreement.
The date of performance prescribed by the agreement was May 14,
1996.

We examine only those materials properly before
the judge who considered the parties’ cross motions for summary
judgment. Mass.R.Civ.P. 56(c), 365 Mass. 824 (1974). See O’Sullivan
v. Shaw, 431 Mass. 201, 203 (2000). Under the terms of the
agreement, the sellers were required to deliver a Title V
compliance certificate for the septic system at the closing.[3]The agreement also provided that the sellers were to
deliver the premises "in the same condition as they now are,
reasonable use and wear and tear excepted," and in the event
that the sellers could not deliver possession, convey title, or
render the premises in conformity with the agreement, "the
time for performance hereof shall be extended for a period
of thirty or fewer days" (emphasis added).[4]
In the event of the buyers’ default, the sole remedy available to
the sellers under the agreement was the deposit given by the
buyer.[5]

On April 23, 1996, a report was issued pursuant
to an earlier inspection of the septic system revealing that the
system had failed inspection. The buyers received notice of the
failure on April 26, 1996, and, according to their affidavit,
decided not to proceed with the purchase because of
"friends’ previous bad experiences with such
arrangements." The sellers invoked their right under
paragraph 10, see note 4 supra, of the agreement to extend
the closing date so as to make the premises conform with a new
septic system. The sellers submitted proposed plans for
constructing a new septic system. After reviewing the new septic
system plans, the buyers, according to their affidavit, again
balked, because "it was clear that the property would be
substantially altered from the condition in which we agreed to
purchase it. The left side of the house was the only feasible
area for a fenced dog area, which due to the leaching fields in
that area was no longer possible. Furthermore, trees which
provided shade for the proposed dog area and privacy from the
neighboring lot were to be removed, and thus change the feel and
aesthetics of the property."

On May 13, 1996, the day before the original
closing date, the buyers through their attorney demanded in
writing the return of their deposit because they disapproved of
the plans for the installation of the new septic system.
Specifically, their attorney stated that the plan,
"drastically changes what they agreed to buy, namely your
land which has a unique beauty to it . . . [and that] it is a
very large system which will mean a significant change in the
landscape." In response, on May 14, 1996, the sellers
refused to return the deposit and notified the plaintiffs’
attorney of their right under the contract to an additional
thirty days to cure.

During those thirty days, the sellers began
construction on a new septic system. On May 31, 1996, the sellers
sent a letter to the buyers, emphasizing that if they did not
purchase the property at the new closing date of June 13, 1996,
their deposit would be forfeited. In the interim, the buyers,
consistent with their previously expressed lack of desire to
consummate the transaction, put a deposit on another property on
May 26, 1996, without the sellers’ knowledge.[6]

The sellers began work on the new septic system
and on June 12, 1996, one day prior to the extended closing date,
the sellers sent a letter to the buyers confirming the closing.
In response, the buyers’ attorney sent a letter indicating that
his clients were not purchasing the property as per his
communication of May 13, 1996. On June 13, 1996, the sellers were
ready to close with a deed and Title V certificate, but the
buyers did not appear for the closing. The buyers demanded their
deposit be returned, claiming that the condition of the premises
at the time of the extended closing did not conform to the
agreement.[7] On July 24, 1996, the buyers brought suit to recover
the deposit, alleging breach of contract. The sellers
counterclaimed for breach of the contract (other counterclaims,
unsuccessful below, are not at issue). On cross-motions for
summary judgment, a Superior Court judge denied the buyers’
motion and allowed the sellers’ motion as to liability only,
ruling that the buyers and not the sellers were in breach of the
agreement. A second Superior Court judge granted summary judgment
as to damages, ruling only that the sellers had established that
their out of pocket expenses exceeded the amount of the deposit.[8]This appeal ensued.

1. Breach of the agreement. The buyers
contend that the trial judge erred in granting summary judgment
in favor of the sellers because it was the sellers who were in
breach (or alternatively, the property had changed in material
respects so that there was no longer a meeting of the minds). The
essential thrust of the buyers’ argument is that, even assuming
that the sellers had a right under the purchase and sale
agreement to attempt to cure the defective septic system (as
appears plain they did), the sellers in so doing materially
altered or substantially changed the condition of the property
which they had expressly agreed not to do. Stated differently,
the sellers agreed to deliver the premises "in the same
condition as they now are, reasonable use and wear thereof
excepted."

We do not understand the buyers to be asserting
that the sellers had no right to attempt to cure the problem of
the septic system and, indeed, the contract on its face
demonstrates the clear intention of the parties to extend the
closing date thirty days in the event the sellers were unable to
convey clear title or premises that conform to the provisions of
the agreement, anticipating a contingency such as the failed
septic system.

The buyers argue, however, that even if the
sellers had an opportunity to cure, the sellers were unable to do
so, thereby excusing performance on the part of the buyers. See Hastings
Assocs., Inc. v. Local 369 Bldg. Fund, Inc., 42 Mass.
App. Ct. 162, 171 (1997). They maintain that this is so because,
in curing the problem of the failed septic system, the sellers
materially altered the real estate. The record reveals that the
buyers consistently communicated that their reasons for declining
to close the deal were the changes in the property — in
particular, the "significant change in the landscape."[9]

We agree with the buyers’ contention that they
have identified a genuine issue of material fact rendering
summary judgment inappropriate. "[R]eal property is
unique." Greenfield Country Estates Tenants Assn., Inc.
v. Deep, 423 Mass. 81, 88 (1996). It is a question of fact
whether the buyers had a right to reject the deal because the
landscape of the property had been altered by the installation of
the new septic system. Compare Hastings Assocs., Inc. v. Local
369 Bldg. Fund, Inc., 42 Mass. App. Ct. at 171. If the fact
finder were to conclude that the landscape had been significantly
changed or the property otherwise materially altered, then the
buyers would have justifiably declined to go through with the
sale and thus would be entitled to get their deposit back. The
task of the fact finder on remand is to determine whether the
installation of the new septic system as planned or built in a
material way altered the appearance or utility of the property
from its state at the time the purchase and sale agreement was
made.

2. Damages. Deciding as we do, we need
not reach the issue of damages.[10]
At this juncture, we merely need to say that, if the buyers are
found to have committed a breach after a decision on the merits
as to liability, any resultant damages are to be computed in
accordance with the teaching of Kelly v. Marx, 428
Mass. 877, 878-882 (1999).

The judgment for the sellers is vacated, and
the case is remanded to the Superior Court for further
proceedings in light of this opinion.

[2] The property was owned as tenants by the entirety by
Edgar and Doris Callahan. A suggestion of death of Edgar Callahan
was filed.

[3]Paragraph 11 of the rider to the
purchase and sale agreement states as follows: "The SELLER
shall deliver a Title V certification at the closing. This
paragraph shall survive the delivery of the deed."

[4]Paragraph 10 of the purchase and
sale agreement states, in part, as follows: "If the SELLER
shall be unable to give title or to make conveyance, or to
deliver possession . . . or if at the time of the delivery of the
deed, the premises do not conform with the provisions hereof,
then the SELLER shall use reasonable efforts to remove any
defects . . . in which event the time for performance hereof
shall be extended for a period of thirty or fewer days."

[5]Paragraph 21 of the purchase and
sale agreement states, in part, as follows: "If the BUYER
shall not fulfill the BUYER’S agreements herein, all deposits
made hereunder by the BUYER shall be retained by the SELLER as
liquidated damages and this shall be the SELLER’s sole remedy at
law or equity for the BUYER’S default."

[6]They subsequently executed a
purchase and sale agreement on the new property on June 1, 1996.

[7]In their affidavit, the buyers
stated as follows: "At the time of the scheduled closing,
the [sellers] did not have a Title 5 certificate in hand, nor
plans for a new septic system that would leave the property we
had agreed to purchase unaltered and intact. We thus felt
that we were being pressured into going ahead with the purchase
of something other than we had agreed to buy, and decided that we
did not wish to purchase the Premises under the
circumstances."

[9]In their affidavit, the buyers
note that on the extended closing date of June 13, they
"viewed the Premises and saw that several trees had been
removed, and furthermore, that substantial construction and
excavation with heavy equipment was ongoing on the
Premises."

[10]In support of the sellers’
supplemental motion for summary judgment on the issue of damages,
they provided the court with authenticated facts that their
damages constituted (1) $55,000 difference in the contract price
and the actual purchase price paid by another buyer; (2)
$37,236.27 in mortgage interest, $4,306 in real estate taxes,
$1,089.44 in insurance premiums, and $2,378.79 for oil and
electricity in carrying the property for thirteen months; (3)
$20,894.90 to expedite the septic system repairs to meet the
extended closing date; and (4) $17,804.96 in legal fees.

In passing, we note that not all of the
out-of-pocket costs may be attributable to the buyers’ alleged
default. For example, the sellers seem to be claiming as out of
pocket the additional cost of expediting the septic system
repair, but they would have had to pay for this work in any
event.

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